Brazil loan defaults stay near highest in almost two years

Bank loans delinquent for at least 90 days in Brazil remained in August at their highest in almost two years, the central bank said on Wednesday, as a widespread downturn and rising borrowing costs kept companies and consumers from staying current on their debt. The so-called 90-day default ratio, a benchmark for delinquencies, came in at the equivalent of 4.8 percent of outstanding non-earmarked loans last month, according to a report. That level is the highest for the indicator since December 2013, according to Thomson Reuters data.
Apart from struggling with stubborn delinquencies, which climbed for consumers in August as unemployment rose in some of Brazil's major urban areas, banks stepped up efforts to ramp up loan-loss provisions and pare back disbursements. Banks disbursed 257.1 billion reais ($63 billion) worth of new loans last month, the least since February.
The data showed that lending interest rates as well as spreads, or what banks charge borrowers relative to the cost of fundraising, rose in August, in a sign local lenders, especially private-sector banks, have become increasingly prudent as Latin America's largest economy slipped into recession. The share of public banks in total credit remained at a record 55 percent in August, the report showed.
Average borrowing costs for non-earmarked loans climbed 1 percentage point to 45.3 percent in August. Private-sector lenders also raised loan-loss provisions to their highest in over two years, as fallout from a corruption scandal at state firms and a plunging economy hampered creditworthiness.
Total bank lending, including earmarked loans, which are credits aimed at investments and homebuilding in accordance with government mandates, ended last month at 3.13 trillion reais. Lending rose 9.6 percent in the past 12 months, the slowest pace of expansion since at least 2011, yet above the central bank's 9 percent estimate for this year. Brazil's Congress early on Wednesday upheld key presidential vetoes to avert a surge in public expenditure and postponed a decision on a possible salary increase for judiciary employees, in a rare victory for an embattled government struggling to rebalance its fiscal accounts.